Google Inc. (GOOG) on Wednesday announced it will issue $106.5 million in stock to acquire On2 Technologies Inc. (ONT) as the Internet-search giant looks to buttress its video operations.

On2 makes video-compression technology, which allows for the quick transfer of large video files across the web. The technology represents a key asset as online-video viewership continues to surge.

Google has one of the most-visited video sites - YouTube. In addition, On2 has software that helps make high-definition video playback possible on mobile devices.

On2's clients include Adobe Systems Inc. (ADBE), Nokia Corp. (NOK) and Infineon AG (IFNNY).

Google executive Sundar Pichai said, "We are committed to innovation in video quality on the web, and we believe that On2's team and technology will help us further that goal.

In a blog post, Google said it was not in a position to discuss specific product plans until after the deal closes.

Each share of On2 will be converted into 60 cents worth of Google stock. On2 closed Tuesday at 38 cents and the stock's 52-week high is 65 cents.

On2 shares surged more than 50% to 59 cents after the deal was announced Wednesday. The deal is set to close in the fourth quarter.

Google shares were recently flat.

On2, set to release its second-quarter results Thursday, in May reported revenue dropped 10% to $4 million as the company's loss narrowed. The company has been cutting costs to save cash, which as of March 31 totaled $3.2 million, down 24% from a year earlier.

-By Kevin Kingsbury, Dow Jones Newswires; 212-416-2354; kevin.kingsbury@dowjones.com

(Jerry DiColo contributed to this report)